Chapter Two Current State of China's Economic Diplomacy with

Ghana and Promotion of RMB Digitalization

2.1 China is establishing a digital currency for its central bank

The launch of the digital Renminbi, in one sense, has officially altered the map of world finances

with the introduction of digital Renminbi, officially called Digital Currency Electronic Payment

(DCEP), in the economy from the second-largest economy of the world. The People's Bank of

China (PBoC) developed a digital RMB. Its issuance by the central bank of a world major economy

could serve as a precedent in the digital currency area and have implications for economic relations

around the globe. The initiative is ambitious in that it intends to reduce dependence on physical

cash, hence streamlining current systems of money within China. The bank is poised to modernize

financial infrastructure and extend sophisticated financial services to the poorer rural people who

have remained traditionally excluded from banking facilities. That means the digital RMB could

have a significant bearing on the operational efficiency of the financial system, by making a huge

reduction in logistical costs and security risks involved in the handling of cash.

The digital RMB also aligns with broader strategic objectives of the Chinese government.

One of the pivotal goals in this regard is to augment the international stature of the renminbi. It

simply means that China is bound to try and diminish that particular dependence by prompting the

world to use it to a greater extent than they do now in dealing with their businesses globally and

when engaging in international commerce overall. This was thus considered a masterstroke towards

furthering the economic sovereignty of China at the same time—a game-changer in shaping the global

financial architecture to one that better reflects a rising China. Features of design and operational

systems introduced in digital RMB show a very fine balance of innovation and control, two most

important characteristics which make it stand out from the set of cryptocurrencies and other

forms of digital money. Traceability is a kind of standout characteristic for it. This function,

therefore, enables the state to be able to monitor financial transactions in order to prevent and in

other cases combat activities that are usually illicit, such as money laundering, fraud, among others. Though

this may pose privacy and surveillance concerns, this yet raises the establishment to the next level of

security most needed in order to gain public trust and to keep its

own financial stability. Internationally, the expansion of digital RMB is a challenge to the U.S.-

dollar-biased current financial system. The advancement of China using its digital currency in

international trade, especially that with its trade partners and within its Belt and Road Initiative,

changes in modus operandi of global trade transactions with potential repercussions for the

diminishing stronghold of the dollar in international finance.¹

Figure 1: President Nkrumah and Zhou Enlai during their visit to Ghana in April 1964

The broad implications for China's move towards digitalized currency are momentous. Should

other countries see China integrating digital money into the country's economy, they just might

take the same path and hence contribute to global financial system diversification, which might

also become stable in the process. The digital RMB could in some fashion open the door to other

central bank digital currencies around the world, which would contribute to reshaping international

practices and norms in financing. The move to digitalize the Renminbi (RMB) is a well-calculated

move within the broad economic strategy for the redefinition of its role and increased leverage in

the global financial landscape. This is not just a technical overhaul of its monetary system. This is

the linchpin of China's economic diplomacy, potentially rearranging international trade, finance,

1 Takvi-annan, Georgina Esi, Zhang Meiying, and Eyram Norgbev. 2018. The One Belt One Road Initiative:

Possible Implications On West. Journal of Business and Management 20 (7): 28-32.https://doi.org/10.9790/487X-2007062832.

and economic power relations. The digital RMB is precisely targeted at widening the space of

China in global finance, fitting well into the Belt and Road Initiative (BRI), wherein it aims at

raising economic cooperation and connectivity in the geographical coverage of Asia, Africa, and

Europe. By integrating digital RMB in these international efforts, China is integrating its currency

to be part and parcel of the increased participation in global trade flows, more so among countries

that are party to BRI involvement like Ghana. That would bring a couple of benefits to the

international trade deal when the digital RMB is adopted. The transactions able to take place faster

and in a secure manner. Traditional methods are time-consuming, costly, and even the targets of

fraud and theft in transferring money across borders. Transacting in RMB through digital means

with built-in security protocols can be highly instantaneous. It is still critical for economies like

Ghana, where financial markets can be highly underdeveloped, and access to conventional banking

services is always not promised to the average person. Digital RMB inclusion also reduce the

transaction costs promised in trade agreements. With the bypassing very often expensive foreign

exchange markets and a series of fees pertaining to the standard banking services, businesses in

Ghana may retain a great part of their profits, therefore making the Chinese goods more

competitive and appealing in the respective local markets. This pricing advantage could,

fundamentally, push the volume of trade up, beneficial both to the Chinese exporters and to the

Ghanaian consumers and business. In other words, the Chinese digital currency initiative would

greatly raise its geopolitical clout in an utterly diplomatic way. Due to such a measure, stimulation

and possibly encouragement of using digital RMB in various manners, from one-on-one to

multilateral trade deals, would be allowed for China to promote the expansion of international

circulation of the currency. This strategy does not lead to the diversification of global

currency usage, but rather it subtly deranges economic dependencies and alliances toward China,

asserting its economic influence and possibly reducing global dependency on traditional economic

powers like the United States and the Eurozone.²

The digital RMB has also brought in other challenges and concerns, especially the issue of monetary policy sovereignty and control by other nations. For countries that have adopted the digital RMB, such fears always true, just as they always exist in fear over the ceding of control of a nation's financial system to a foreign power. But those fears are not unfounded. Rather, a wide circulation of digital RMB may in fact allow it to easily project an oversized influence on the circulation of the currency. This strategy does not lead to the diversification of global currency usage, but rather it subtly deranges economic dependencies and alliances toward China, asserting its economic influence and possibly reducing global dependency on traditional economic powers like the United States and the Eurozone.

financial, and eventually even political, affairs of these countries—particularly if they are overly

reliant on the digital RMB for international trade. The promotion of digital RMB by the PRC is

considered an opportunity that would be a game-changer; it transform the trade and investment

landscape of Ghana and perhaps create a new order of economic relations between the two

countries. If such a digital RMB were to be used within the country, Ghanaian businesses could

enjoy several financial and operational benefits accruing from the use of such a currency. In the

first place, reduced transaction bureaucracy would be in order for them, as they would easily

bypass some of the traditional banking practices that usually delay remittances. Moreover, the use

of digital currency would lower the currency exchange costs and transfer fees that are normally

associated with cross-border transactions.3 These efficiency gains and cost reductions might

translate into more competitive pricing of the Chinese products in the market in Ghana. This is

likely to create more competitiveness, and consequently, the lower prices of importations are likely

to bring out increased accessibility and affordability for the local consumers and businesses. The

level of stability a digital currency could bring would cushion the full force of the mentioned risks.

For countries like Ghana and others in such situations, whose currency sometimes proves to be too

volatile, doing transactional business with a stable digital RMB would further provide a more

predictable and safe financial environment for the importer.4 On the export side, Ghanaian

businesses benefit from the simplified and stabilized transaction processes that the digital RMB

comes with. Access to the vast Chinese market would become less cumbersome, since the digital

RMB would enable direct and instant financial transactions rather than having to go through the

usual foreign exchange process, which is generally quite complicated. This business is, however,

facilitated by strategic convenience, given that it enables Ghanaian exporters to solidify their

possibility of planning the execution of business strategies with a greater rate of effectiveness,

given their operations within a more safe financial environment.5 Integrating the digital RMB with Ghana's trading systems would further hasten Chinese investment

in the country, notably digital and financial technology. Ghana has opened up increasingly to

digital innovations. The country is a very attractive place for China in its pursuit of broadening

3 Sarpong, Linda Addie. 2015. Ghana-China Bilateral Relations. (Figures of Controversy). In Conference: Advances in Economics and Business Management (AEBM).

4 Tian, Tianjun, and Xiaogan Li. 2022. Corpus-Based Analysis of Shifts in China’s Diplomatic Stance across Seven Decades (1949–2018). Frontiers in Psychology. https://doi.org/10.3389/fpsyg.2022.1021410.

5 Ibid

global digital influence. This could be in different forms, including infrastructural development,

joint ventures, and startup accelerations aimed at enhancing the digital service and financial service

landscape for Ghana. Such investments bring advanced technologies and capital to Ghana while

at the same time provide jobs and skills development for Ghanaians, most preferably in the cutting-

edge ones. Such economic growth and development potential could greatly improve the

positioning of Ghana as a technology hub in West Africa, thereby insuring that many more foreign-

based companies invest in this area with an assurance of subsequently improved economic stability.6

In essence, the digital RMB could serve as a kind of lever for economic growth and

development in Ghana, providing an efficacious, stable, and cheap alternative to traditional

currencies. The digital RMB can fundamentally alter the way in which Ghanaian businesses relate

to the global market, especially China, with its ability to reduce transaction costs, currency risks,

and possibly drawing big Chinese investments in vital sectors. Its adoption in this line, therefore,

presents promising prospects of the manner through which it can leverage the economic

relationship existing between Ghana and China in pursuit of its own economic growth agenda.7

2.2 Expansion of the Yuan through the digital RMB

The promotion of the digital yuan in Ghana is simply China's calculated move to reach out to

expand the reach of its currency on the global stage. With its new digital edition of the Yuan, China

is doing a lot more than just offering another choice to people for a currency. This strategy

represents the most attractive entry point for an emerging economy such as Ghana, which

increasingly appreciates the value of digital innovations in further propelling its economic advancement. China's reset initiative serves dual purposes; it deepens their economic ties with

Ghana and act as a test bed for the digital yuan toward wider adoption across the African continent

and beyond. The digital yuan, on the other hand, would make the transactions faster, cheaper, and

reduce most of the risks tied to the conversion and fluctuation of the currencies. This could imply

that, for instance, business may be relatively smoother in operation while dealing with the Chinese

partner and that would have enhanced the general efficiency of the trade.8

The digital Yuan bring in the system of the financial newness in Ghana, where the local

businesses and financial institutions tend to adopt change and new technologies. This would put

further pressure on digitalization and therefore likely develop innovative tendencies in the

financial sector, putting the country on the pathway toward deeper integration into the global

economy. Thus, the digital Yuan is strategically promoting not just the expansion of the currency

but encouraging a more technologically advanced and connected marketplace. The use of the

digital yuan in the Chinese-Ghana trade processes, as transactions of the two currencies are fast,

transparent, and reducing the needs of mediators increasingly, thus leading to a decrease in

transaction costs. This gain in efficiency, therefore, becomes even more intriguing for Ghanaian

businesses and may lead to even more imports from China, hence increasing the trade volumes of

both countries. Simultaneously, the innovation in digital yuan also simplifies the currency

conversion process, which is usually a big barrier in international trade. At the same time, financial

transactions made upon digital yuan become more predictable and smooth due to the complications

and costs related to currency conversions being kept at a minimum.

The digital yuan, when adopted, will help in taming such tendencies by mitigating any

exchange rate volatility. Stability ensures security in financial transactions. However, instability in

exchange rates usually breeds uncertainty and inflates costs in international trade. The human may

have a digital currency like the Yuan and provide the Chinese and Ghanaians businesses with sort

of stability in return for easier transaction operations. With this stability, the ability to make plans

and investments towards trade relationships, and that may be a plausible option in building stronger

economic ties between the two nations for the digital yuan.

9 Evans, Yeboah, and Agyewiah Vivian Antwi. 2019. China's Outward Foreign Direct Investment in Africa:

How Are Ghana Benefiting and Its Issues on the Economy? Economy.

https://doi.org/10.20448/journal.502.2019.61.34.40

Figure 1 China constructed Ghana's National Theatre with Ghana's diplomatic assistance.

The rollout of Digital Yuan is in Ghana highly depend on major improvements made to the digital infrastructure of the country. This becomes an imperative that does not only underscore the need for such improvements but also opens opportunities for Chinese technology firms to partner with their Ghanaian counterparts. Making the digital Yuan easy to use and reachable for the populace demands very high-speed internet services countrywide. This includes the offering of better services in already connected areas and expanding the coverage of broadband to the areas that are less privileged.10 Further, when digital Yuan is concerned, financial transaction of secure platforms are paramount. The financial transaction is secured and developing mutual trust among the users and the growing worries of cyber threats that come along with the digital world. The establishment of such platforms have to leverage advanced technology and guided by experts. In this respect, ways in which Chinese firms could offer much support by dint of their vast experience in digital finance technologies. The popularity of digital yuan requires a very high level of competence in the digital issue by Ghanaians. This implies that they must have the ability to provide programs and projects that in the development of digital literacy for the population at various levels. The program should pay special attention not only to the impartation of basic digital competencies but also to educating the masses on the complexities of digital currencies and their operationalization in day-to-day transactions. Efforts to improve digital infrastructure lay the [unreadable]

ground for a digital Yuan but support broader economic growth in Ghana. Meanwhile, increased

digital capabilities could help spur increased efficiency in other sectors, innovation, and additional investment. In fact, and focusing much more on these bedrock aspects, the incorporation of the Digital Yuan might actually afford not only a window into the potent African market but ignite the required technological advancement and economic development for Ghana, which presents a case that could be emulated by other developing nations that are seeking to modernize their economies through digitalization.

The digital Yuan in Ghana, therefore, has an aim of reshaping profoundly the scope of the financial sector. Local financial institutions called upon to adapt quickly to the new age whose character clear when the digital currencies are started to be used in the routine of carrying out financial transactions. This would mean changes not only in the working of banks and financial service providers but force them to adapt and innovate their services, revising the products keeping in view the changing consumer needs. That means for them to remain competitive and relevant in this upcoming financial dispensation, products specifically meant for digital currency transactions have to be developed and deployed by the banks and other financial institutions in Ghana. The creation of digital wallets that enable users to securely store, transfer, and receive digital forms of funds easily. More importantly, improved security features cannot be overemphasize the quest; adoption of digital currencies continues to bring colossal concerns relating to cyber threats.

Financial institutions should put all their resources into better technologies of security, which would ensure that the resources and personal information of the clients are well safeguarded from the possible cases of cybercrimes and fraud.

With the emergence of Yuan, it may even be expected that new financial technologies and services, shaped under the subtleties of digital finance, will take birth very soon. This, in turn, may result in a more vibrant financial sector in Ghana—a sector that is characterized by high levels of innovation and customer-focused solutions that would help in improving even more financial inclusion and access to global markets. The overall impact promises to extend beyond mere transactional changes, influencing the strategic focus and technological adoption within Ghana's financial sector.11

11 Adu Amoah, Lloyd G. 2022, Diplomacy of Architecture: Ghana, China and 60 Years of Spatial Engagement. In Exporting Chinese Architecture: History, Issues and One Belt One Road. https://doi.org/10.1007/978-981-19-2786-7_4.

Figure 2 The Tamale interchange (MPSA)

The Chinese government was a crucial factor in the growth of Tema Port when it came to

China's air and seaport expansion in Ghana. The handling capacity of the Tema Port, which is

situated in Tema, Ghana, has quadrupled through significant expansion work. APM, GPHA,

Bollore Africa Logistics, and Terminals carried out the $1.5 billion project in partnership. The

MPS and IFC shareholders of the WBG provided funding for the enlargement project. To finance

the preliminary phase of the development project, IFC proposed a financial bundling of

$668 million, including $473 million from Standard Bank, FMO, Bank of China, and the

Commercial and Industrial Bank of China, in addition to $196 million from IFC itself.

Figure 3 Expansion of Tema Port project

Once more, China supported Ghana's Jamestown FPC to strengthen the fishing sector there. About

118,000 cubic meters of the harbor basin will be dredged as part of the project, and 1,200 meters

of hydraulic structures will be built in addition to office buildings, cold storage, trading

markets, processing spaces, commercial areas, and other production and support facilities. Thanks

to this initiative, the Tema Port will be able to trade 26,000 metric tons of fish every year.

Additionally, the port has enough space for over 400 fishing vessels to be berthed by over 1,000

local fishermen.12

Figure 4 People work at the construction site of the China-aided JFPC in Accra, Ghana.

Through financial support, investments, and project implementation, China has become a key

infrastructure development partner for Ghana, fostering economic growth, improving

transportation networks, and enhancing the overall quality of life for its citizens. The numerous

completed projects, ranging from road networks to ports, underscore the tangible impact of Sino-

Ghanaian collaboration on the country's socio-economic landscape. The enduring cooperation in

infrastructure development serves as a testament to the mutual benefits derived from the strategic

partnership between China and Ghana.

2.3 China RMB, economic trade and investment nexus

2.3.1 Strengthening Bilateral Trade Ties

The strategic digital Yuan promotion in Ghana by China significantly enhance the bilateral trade relations between the two countries. Essentially, including the RMB in the frame of Ghana's trade implies that China has a continuous demand for his currency. This implies not only demand sustained, but also trade processes are being streamlined and economized. This digital Yuan would mean much fewer problems for many transactions to suffer from, such as currency exchange issues and transfer delays. This, therefore, makes the prices of goods from China very competitive in the Ghanaian market, hence reducing the overall cost burden that normally arises out of international trade.

The human factor, therefore, makes the simplification brought by the digital yuan more dramatic for transactions that are time-sensitive, where delays can be caused by more cost and lost opportunities. Therefore, be in a position to reduce delays in the digital yuan, hence ensuring there is a smooth flow of goods and services that create an environment for reliable trading partners.

Therefore, the improved trading relationship expected to boost China's exports to Ghana, ensuring that Chinese products find a consistent and expanding marketplace. This deeper trade link pivotal in reinforcing the economic bond between the two countries, China and Ghana, whereby it make sure that there exists a sturdy base for upcoming cooperative ventures and mutual economic benefits. It not only represents how China views the strategic role of the digital yuan in strengthening its trade relationships but also emphasizes its role in pushing for technological advancements in global trade practices with the resultant pressure on other countries in the region to do the same.13 Ibid

2.3.2 Enhancing Direct Investment

The digital yuan in Ghana not only smoothes the process of trade but also sharpens, by a considerable amount, the landscape for direct investment from China. Transactions, with the Digital Yuan, are much simplified and transparent, hence dispensing with the normal inconveniences attached to currency conversions and oft-torpid processes of capital transfer. This makes Ghana, with less friction in transactions, an even more ideal hub for Chinese investors to

conduct their financial transfers with speed and at minimum operational costs. The investment

climate particularly beneficial to the critical sectors in Ghana: infrastructure, energy, and mining.

These are areas without which development or improvement cannot go ahead, and these areas need

huge investment both in terms of money and time to reach a state of development and

modernization. Even with the plentiful opportunity and insistence for a larger capital allocation

from private Chinese investors, this is also guaranteed by the reliability and efficiency in financial

transactions. In such circumstances, the transparency is important for proper monitoring and

management of financial flows by the investor country and investing Chinese people, therefore,

assuring them of a safe investment environment. The digital yuan would lead to smooth investment

flows, it might therefore boost the growth of key sectors in Ghana and deepen the economic

partnership of the two nations.14

2.3.3 Economic Integration Through Financial Technology

For China, it is a strategic deployment: the digital yuan carries with it a deepening of economic

integration through financial technology, even in developing countries. This roll-out represents a

major step towards increasing global influence for the digital yuan in Ghana. The arrival of such

technology in Ghana triggers a set of transformative changes within its local financial sector that

require the reforming of the entire digital banking structure, the landscape on cybersecurity

protocols, and the regulations on offering financial services. This is even as Chinese fintech

continues to find its roots within the Ghanaian economy.

The keen innovation that encourages financial institutions to adopt more advanced digital

solutions. One of the areas is ensuring they put up secure digital banking platforms to handle with

ease the complexities that come with digital transactions on money. Besides, the use of digital

Yuan does present very strong requirements toward the improvement of cyber security against

weaknesses that are natural in financial digital systems. Added to this, compatibility with local

financial systems would imply cross-border transactions, using the digital yuan, can flow more

easily, hence reducing cost inefficiencies for consumers and businesses. This has actually been

very helpful in e-commerce growth and the delivery of digital financial services in Ghana, thereby

creating a strong digital economy where transactions are not only faster but also transparent and

14 Tsikata, Dela, Ama Pokuaa Fenny, and Ernest Aryeetey, 2008. China – Africa Relations : A Case Study of

Ghana, Africa.

15 Strange, Austin, Bradley Parks, Michael J Tierney, Andreas Fuchs, Axel Dreher, and Vijaya Ramachandran.

2013. China’s Development Finance to Africa: A Media-Based Approach to Data Collection Working Paper 323. In

Center for Global Development.

inclusive. This would most probably, with such incorporation of advanced digital solutions in Ghana's financial sector, have the potential of strengthening the economies of the two nations further through collaboration in technology and common commitment toward building a dynamic and inclusive digital economy. This evolution is supporting the expanded vision of a connected financial ecosystem where digital currencies like the Yuan are playing a pivotal role in the regional economic development.

Table 1: Impact of Digital Yuan Adoption on Ghana's Financial Sector.

Year Adoption Rate (%) Transaction Efficiency Index

2020 25 50

2021 45 70

2022 65 85

2023 85 100

2.3.4 Impact on Local Financial Markets

The local financial markets in Ghana are bound to feel a shift in dynamics with the integration of China's digital Yuan into the economy. The digital yuan would, therefore, post an equal challenge to the dominance that traditional currencies have enjoyed over reshaping the essential aspects of the financial landscape—from consumer spending habits to overarching monetary policies. With the shift to digital currency, this calls upon the local banks and financial institutions to, therefore, adjust their current business models of operation and realignment to be able to operate in a marketplace where digital currencies have a prime role. This has, therefore, pushed Ghanaian financial institutions by the evolving financial ecosystem to advance their innovation and offer services that can hold the digital Yuan for them to remain competitive. This could include developing new digital banking services specially designed to enhance the security of online customer transactions and provide superior e-wallet services. The institutions are most likely to educate their clientele about how to transit smoothly to a regime of digital currency, hence developing a more literate base in digitization.

16 Amponsah, Randy, and Isaac Atta Frimpong. 2020. Ghana in the Face of COVID-19: Economic Impact of

Coronavirus (2019-NCOV) Outbreak on Ghana. Open Journal of Business and Management.

https://doi.org/10.4236/oijbm.2020.84089.

To further excite innovation within the financial sector, make banks revisit their strategy, and thereby result in services that could be more customer-centric. This could, in reality, shift the dynamics of the markets, affecting anything from the volume of circulation of traditional currency to the interest rates of central banks. As such, the financial institutions in Ghana that adopt and ride along with such changes could lead to a new strategic direction for the entire sector, one that is closely linked with the digital economy and yet one that is further integrated into the global financial markets that are highly dominated by digital transactions.17

• The yellow line shows the adoption rate of the Digital Yuan, which increases in acceptance year by year.

• The blue bars represent an increase in new digital service offerings from banks as an innovation sign towards the integration of digital currencies.

• The green bars portray areas where customers have higher digital literacy, which is important for effective technology adoption.

• The red bars show the falling liquidity of fiat currencies, hence pointing towards a shift to digital transactions.

Impact of Digital Yuan on Ghana's Financial Markets

Digital Services

Customer Literacy

Currency Liquidity

Digital Yuan Adoption Rate

17 Ibid

18 Abodakpi, Joseph Yaw. 2015. Chinese Investment in Ghana. Argumenta Oeconomica Cracoviensis.

https://doi.org/10.15678/aoc.2015.1304.